Physician-owned hospitals in North Texas are finding ways to expand despite being banned from accepting Medicare and Medicaid patients.

They are catering to and cashing in on a narrow patient market.

“I do not believe in trying to be all things to all people because when you do that, you can become quite large and quite burdened by overhead,” said Robert Helms, CEO of Victory Healthcare. “To me, the most efficient model is a smaller model that is very focused.”

For-profits with doctor ownership were supposed to have their growth halted by the Affordable Care Act. Critics said they increased prices, cherry-picked patients and created conflicts of interest from doctor self-referrals. The law prohibited physician-owned hospitals at the time from expanding, and those that did couldn’t accept Medicare or Medicaid.

But Victory and Dallas-based Forest Park Medical Center are two examples of doctor-owned hospitals expanding freely by working solely through private insurers.

Victory, based in The Woodlands, was founded in 2010, the year the Affordable Care Act was passed. It operates small, specialized surgical centers that average around 25 beds a facility.

Victory ventured into Dallas-Fort Worth in 2011 with locations in Hurst and Plano. It will open a McKinney center in August, and it broke ground last month on a Fort Worth site. Each facility is up to 40 percent physician-owned and employs about 150 staff members. According to Helms, they sprang up from doctors approaching Victory.

“It’s not a matter of knocking on doors,” he said.

Helms is looking for more D-FW locations. He hopes to expand statewide at a rate of about two facilities a year.

“I like it because all these markets are growing because of the success of the economy of our state, oil in particular,” Helms said. “D-FW is a very rapidly growing area. It’s my desire to have a number of facilities [in D-FW], maybe five or six.”

Forest Park chain

Forest Park Medical Center, entirely owned by doctors, has grown from one hospital in Dallas to two more in Frisco and Southlake since 2011. Those three facilities employ a total of about 1,000 people and cost about $100 million each to build. Centers in Fort Worth, San Antonio and Austin are under development.

“It’s the difference between owning a car and renting a car,” said Robert Wyatt, a Forest Park managing partner. Doctors “want to remain independent. They don’t want to become employee physicians.”

Blake Curd, president-elect of the Physician Hospitals of America, an association that represents about 235 hospitals owned by doctors, said the physician-owned model leads to quicker results for patients.

“Nonprofit hospitals have become monuments to bureaucracy,” Curd said. “To get anything changed for the better of the patient is a behemoth undertaking. We’re there at street level delivering the care and seeing the impact of it.”

But critics remain.

Opposition

The American Hospital Association has been fighting physician-owned hospitals for years.

In 2006, AHA testified to Congress that “when physicians own, even in part, the facilities to which they refer patients, their decisions are subject to competing interests,” according to an AHA-provided transcript of the hearing. “Profit — not patient care — has become a strong motive for practicing medicine,” AHA said.

AHA, which represents 4,800 member hospitals, argued in a recent statement that physician-owned hospitals tend to “cherry-pick” the most profitable patients, are usually associated with higher health care costs and offer “limited or no emergency services.”

Ultimately, the AHA said, physicians referring patients to facilities they owned “created an unlevel, anti-competitive playing field and threatened the health care safety net.”

Dr. Joanne M. Conroy, chief health care officer of the Association of American Medical Colleges, said physician-owned facilities burden nonprofits. Conroy said they tend to reject patients with ongoing health issues, concentrating that load on the nonprofits.

“I’m not sure that’s the spirit in which we want our hospitals to be run,” Conroy said.

The prices are too high, said Bob Kocher, a partner with health care investment firm Venrock. Kocher previously served as a special assistant to President Barack Obama on health care and economic policy. He was a key shaper of the Affordable Care Act.

“Many of us were concerned by some of these hospitals that appeared to be excessively expensive and excessively lavish,” Kocher said. “It didn’t strike us that we were getting our money’s worth.”

Growing force

Despite voices of opposition, physician-owned hospitals are becoming ever more present in Texas.

Eighty-two percent of state physicians reported last year that there were doctor-owned specialty hospitals, surgical centers or imaging centers in their area, according to a biannual survey conducted by the Texas Medical Association. Physician Hospitals of America claims around 75 member hospitals in Texas. That’s the most in the country, and 29 of those are in Dallas-Fort Worth.

Unlike most states, Texas lacks a certificate of need law, which requires new hospitals to seek permission from state agencies before constructing facilities.

Wyatt, the Forest Park managing partner, described the current growth as “challenging” because of the Affordable Care Act regulations in place. Some markets fare better than others, he said. Usually in smaller communities where there are a high percentage of Medicare and Medicaid users, it’s difficult for doctors to maintain and expand their own hospitals, Wyatt said. And that goes for physicians and patients, he said.

“That’s what physicians prefer — it gives them governance in the hospital,” he said. “There’s no easy way to say this: The whole priority is taking care of patients, and nobody knows the patients better than those who take care of them.”